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Walmart U.S. Posts Q2 Rise in Comps, Earnings Down

Wal-Mart Stores Inc. posted a comparable-sales increase of 1.5 percent, driven by traffic of 1.3 percent, for its second quarter of fiscal 2016. Neighborhood Market comps rose about 7.3 percent, with strong growth from new stores. 

Total revenue for the mega-retailer came to $120.2 billion, while diluted earnings per share (EPS) from continuing operations was $1.08, 

Walmart’s e-commerce sales increased worldwide by about 16 percent, and gross merchandise value (GMV) grew about 18 percent.

The quarter’s earnings were pressured, however, by fluctuating currency, lower Walmart U.S. margins, and investments in customer experience. As a result, consolidated operating income fell 10 percent.

By division, Walmart U.S. posted a 4.8 percent net sales increase and an 8.2 percent decline in operating income, while Sam’s Club’s net sales were down 0.9 percent (up 2.8 percent excluding fuel); its comps without fuel were up 1.3 percent and its operating income was down 13.4 percent (9.7 percent without fuel). Walmart International reported a net sales decline of 9.6 percent (up 2.8 percent excluding the foreign exchange rate) and an operating income plunge of 14.2 percent (1.5 percent excluding the foreign exchange rate).

Walmart Fundamentals Improving

“We'e pleased that the investments we've made are helping to improve our business,” said Doug McMillon, president and CEO of Bentonville, Ark.-based Walmart. “Even if it's not as fast as we would like, the fundamentals of serving our customers are consistently improving, and it's reflected in our comps and revenue growth. In this case, our desired changes require investments, which are pressuring earnings this year. We're confident that our strategic plan will create robust sustainable growth for shareholder returns over time."

The company has updated its full-year EPS guidance to a range of $4.40 to $4.70, from a previous range of $4.70 to $5.05. This range includes third-quarter EPS guidance of 93 cents to $1.05.

“We continue to invest in our business to enhance the customer experience,” noted EVP and COO Charles Holley. “Operating profit will be pressured for the remainder of the year, due to continued investments in store associate wages and additional hours, as well as headwinds from pharmacy reimbursements and ongoing shrink, primarily in Walmart U.S. In addition to these pressures on Walmart U.S. gross margin, we continue to be impacted by currency exchange fluctuations.”

Walmart operates 11,532 stores under 72 banners in 28 countries, and e-commerce websites in 11 countries. 

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